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As far as my silly little data experiment goes here, there isn't a correlation between negative or positive price swings and Strategy's buys of bitcoin.
Saylor persistently buying coins is priced in so the price doesn't' move on the news
I agree, although I wonder how this can be the case. In a month like December, there were two weeks with tiny buys and two weeks with monster buys. In a month like October there were really only rather small buys, announced on a weekly basis.
How do you figure people interested in trading Strategy's buys manage to know which kind of week it will be ahead of time? (I assume that people in the business hear about these things and so I assume that the effects of the trade do show up in exchange prices).
I wonder if the size of his buys has to do with how much is available near the spot price. Do we know anything about how he organizes these purchases?
You might have the causality backwards in thinking that the size of his buys should be driving prices.
I'm not sure I understand. Saylor may buy more or less based on what he sees in the price, but my question in the above comment is when does the market learn about his actions?
If he buys a whole lot, when do the people who price in the news do their pricing in? Is it while Saylor is buying? Is it after he announces that he bought? Or is it before he even begins buying...but in this last case, I imagine it's only the insiders who know what's coming who can do the trade.
If you are referring to the larger argument of the OP, I'm mostly trying to say there isn't a correlation between Saylor's announcements and a particular kind of movement in the price of bitcoin.
If there was a correlation, we could question whether saylor buys because of the correlation or saylor's buys lead to the correlation.
Maybe I should be asking "can we determine when the market "prices in" Saylor's actions?"
There might be no consistency to when the market prices in his buys, depending on what his decision making process is.
Somehow he's coordinating these transactions ahead of time with extraordinarily large bag holders. Unless we know how that's happening, it will be hard to know what to expect wrt the timing of price movements.
This is some of why I tried looking at a full year's worth of data. If you look at the average of daily closes for the 7 days before every buy announcement and the average for the 7 days after every buy announcement and then compare:
- Mean (post − pre) ≈ −$40 (basically zero)
- Median (post − pre) ≈ +$1,043
- 58% of buys had post-week avg higher than pre-week avg (42% lower)
Maybe there is a slight avg higher price in weeks after Saylor announced that he bought bitcoin.
I think even if we can't find a reliable effect, it's still a little remarkable that there doesn't seem to be a correlation to any real market price action in the areas around his biggest announcements.
There were 12 separate events where Saylor announced purchases over 10k bitcoin. 4 of these were close to or above $2 billion transactions. I figured comparing these large ones to the smallest announcements might also reveal some measurable difference in price behavior -- but unfortunately I didn't find a correlation. I'd be very curious if someone with some real statistics training could find something else.
The hypothetical I'm trying to work through is what happens to the market price if Saylor is convincing large bitcoin holders, who weren't looking to sell, to sell to him (perhaps even by offering them something in return that we aren't aware of).
I figured comparing these large ones to the smallest announcements might also reveal some measurable difference in price behavior
You're assuming the purchase is an independent variable though. What I was proposing is that the purchases are larger or smaller depending on market features: i.e. he buys less when buying more would dramatically move the price.
Derivatives set the interim price of Bitcoin. Saylor persistently buying coins is priced in so the price doesn't move on the news and in fact it probably reacts negatively after his purchases because traders know there is whale demand that won't be back in the market in the near term so they can happily sell or short.
Most crypto traders are morons but there is probably a smart trading outfit out there that has figured this out and knows when to sell during Saylor's buying window and when to buy back after the price has dropped post his buys. Rinse and repeat.
Even though it doesn't look like it, my guess is they are probably pretty strategic with buys and do them with as little interference to the market price as possible. the real market impact would probably only be seen if they exhausted OTC desks of their supply and they had to go into the spot market to buy to satisfy demand.
This also gets into the paper bitcoin question. If an OTC desk was running out of Bitcoin could they call up Coinbase to borrow some. Which depending on Coinbase Prime customers agreements may or not be Saylor's own coins. Haha